Guide to Alternative Minimum Tax (AMT)
Our free online guide to the alternative minimum tax, or AMT.
Alternative minimum tax, or AMT, is an additional tax you may have to pay on top of the regular income tax. Originally designed to prevent high-income individuals from using tax shelters and other gimmicks to pay less than their fair share, it now applies to millions of ordinary taxpayers. Broadly speaking they can be divided into three groups:
- People with larger than average deductions for personal exemptions and/or state and local taxes. Often there is little they can do to plan around this problem.
- People with some unusual item on their tax return, such as a large long-term capital gain.
- People who exercise incentive stock options and decide to hold the shares. Planning is often crucially important for these people.
This section of our website deals with the first two categories, and provide background that may be useful for those in the third category. Further information about AMT planning for incentive stock options can be found in our free online Guide to Compensation in Stock and Options, and in our books Consider Your Options for people who receive options and Equity Compensation Strategies for professional advisors.
AMT in General
These pages cover alternative minimum tax issues of general interest.
- Alternative Minimum Tax 101
Read this page to get the big picture.
- Top 10 Things that Cause AMT Liability
Or maybe 11.
- AMT and Long-Term Capital Gain
Explains why you may run into alternative minimum tax liability when you have a large long-term capital gain — and what you can do about it.
- AMT Capital Loss Trap
Some people inadvertently pay AMT they don’t owe when they fail to realize a regular tax capital loss carryover can be used in the AMT calculation.
AMT for Those with Incentive Stock Options
These pages deal with rules that typically apply only if you exercise incentive stock options.
- Dual Basis Assets
It’s important to realize that you can end up owning assets that have an AMT basis that’s different from the basis you use for regular tax purposes. If you miss this detail you may end up throwing tax dollars away.
- Claiming AMT Credit
You may be able to claim AMT credit from exercising an incentive stock option even if you haven’t sold the shares. If you failed to do so, you have a limited amount of time to correct the mistake.
Long-term unused minimum tax credit
These pages deal with special rules that expired in 2012 and are not expected to be reinstated. As a result, they are unlikely to be of interest unless you’re amending a prior year return.
- Refundable AMT Credit
Overview of the refundable credit.
- Refundable AMT Credit Calculation
A description of the steps in calculating the refundable AMT credit.
- Long-Term Unused Credit
Rules for determining how much of your unused credit is long-term.
- Tentative Refundable Credit
This is the portion of your long-term unused credit you’re allowed to claim, subject to coordination with the regular AMT credit.
- Coordination with Regular AMT Credit
The refundable credit is allowed only to the extent it exceeds the nonrefundable AMT credit.